RLPC-UPDATE 1-EMEA syndicated loans down 35 pct year to date

(Adds data, background and comment)

By Tessa Walsh

LONDON, Sept 28 (Reuters) - Syndicated lending to companies
in Europe, the Middle East and Africa fell by 35 percent to $454
billion in the first nine months of 2009 despite more
competitive loan pricing, according to Thomson Reuters LPC.

The slump shows a continued contraction in lending following
a 49-percent drop last year which pushed record numbers of
companies into the bond market to secure medium-term debt.

Volume of $91.7 billion was the lowest third-quarter figure
since 2001 and well below the highest third-quarter figure of
$422 billion reached in 2007.

Conditions improved in the third quarter as macroeconomic
initiatives by governments and central banks fed liquidity and
confidence back into the loan market, but demand stayed low and
lending was 47 percent lower than the third quarter of 2008.

Borrowing was dominated by highly rated companies' efforts
to refinance existing loans in the absence of funding for new
mergers and acquisitions (M&A) activity after a strong rally in
equity prices made potential targets more expensive.

Lending to high-grade companies was stable at $334 billion
in the first nine months while there was record corporate bond
issuance of $265 billion, according to Thomson Reuters SDC.

Loan refinancing activity jumped 43 percent year on year.

High-grade companies borrowed $43 billion in the third
quarter, of which $37.6 billion or 87 percent were used to
refinance existing loans, emphasising the lack of M&A financing.

M&A financing of $97 billion for the first three quarters
was down 59 percent from the same period of 2008 and all but
ceased in the third quarter with volume of just $2.7 billion.
A relatively small number of third-quarter refinancings were
well received and oversubscribed as bank liquidity improved,
which prompted a rapid decline in loan pricing in line with
tightening bond spreads.

Average pricing for high-grade companies peaked in the
second quarter at 197 basis points (bps) for BBB rated companies
and 157 bps for single A rated companies, according to TRLPC,
but several deals priced under 100 bps in the third quarter.

German utility RWE AG (RWEG.DE) took loan pricing to a new low with a 2
billion euro refinancing in September which was priced at 60-70 basis points
over EURIBOR.

The biggest high-grade loan of the quarter was the $3.9 billion forward
start loan for independent oil trader Vitol SA amid a run of refinancings for
commodities trading companies.

The volume of forward start loans -- loans lined up now to extend existing
loans at maturity for increased pricing and fees -- dropped to $11 billion in
the third quarter from $27 billion in the second as companies became more
confident of support from relationship banks.

LEVERAGED LENDING LOW

Despite a record rally of nearly 30 points in secondary loan prices this
year to 87.36 percent of face value, lending to riskier, more indebted
leveraged companies remains low and the market for new buyouts remains closed.

Lending to leveraged companies in the first three quarters totalled $39.9
billion, down 60 percent from the same time last year as increased provisioning
required by the Basel II capital accord made it expensive for banks to lend and
firms to borrow.

Private equity firms made up around 25 percent of that figure, borrowing
$9.8 billion in the year to date, showing an 88 percent reduction from last
year.
The slowdown continued in the third quarter when leveraged companies took
$12.5 billion of loans, down 57 percent from the same quarter of 2008.

Some $7.5 billion of this total was linked to private equity firms' efforts
to restructure debt at portfolio companies into more manageable capital
structures.

These 'amend and extend' deals allowed stronger leveraged companies to
extend existing loans and amend loan covenants, often before refinancing some
of that debt in the high yield bond market and extending maturities further.

The high-yield bond market remained receptive and European companies raised
$4.2 billion of new bonds in the third quarter, according to Thomson Reuters
SDC.

The largest leveraged loan of the third quarter was the $3.4 billion
extension for Belgian cable company Telenet (TNET.BR) which allowed the company
to extend most of its loan for a further two years.

Thomson Reuters LPC's 2009 EMEA bookrunner league table of completed loans:

Rank Bank Volume($bn) Deals Share (%)

1. BNP Paribas 28.48 111 10.33

2. Royal Bank of Scotland 25.69 57 9.32

3. Calyon 22.13 70 8.03

4. Societe Generale 19.22 46 6.97

5. Deutsche Bank 16.61 26 6.03

6. Barclays 14.92 29 5.41

7. Commerzbank 13.95 26 5.06

8. Citigroup 11.20 22 4.06

9. Banco Santander 10.23 23 3.73

10. HSBC 9.54 28 3.46

(Reporting by Tessa Walsh; Editing by Jason Neely)